Tesla stock surged again on Tuesday after major shareholder Ron Baron forecast the company will top $1 trillion in revenue in a decade and as investors who bet against the stock scrambled to catch up.
"I just can't believe this freaking stock. It's insane," Roth Capital analyst Craig Irwin said on CNBC's "Squawk Box." "This is a big separation from those of us who like to pull out the calculators and look at reality."
Tesla shares closed up 13.7% at $887.06, a record high for the stock. But Tuesday's jump had gone as high as 23% –hitting an intraday record of $968.99 a share. More than 50 million Tesla shares have changed hands – also a record for a single day of Tesla trading. The stock has an average daily trading volume of 18.4 million shares.
The climb comes a day after Tesla jumped 19.9%, which had been its biggest one-day gain in six years.
Tesla shares have more than doubled this year already, fueled by analysts raising price targets to catch up to the stock and short-covering by investors betting against the shares. Analysts still can't keep up with the run. The average 12-month price target of analysts is $493, up from $334 in December, according to FactSet. That new target is 44% below where the stock is trading currently.
Roth Capital's Irwin explained that the investor interest in Tesla is coming from some of the biggest financial institutions.
"I think this is largely the fear of missing out," Irwin said. "The number of large hedge funds calling in, the number of institutional investors calling in, saying 'Where does it stop? What's the catalyst?'"
"The momentum is huge," Irwin added.
At the same time, short sellers are scrambling. Those betting against the stock are down more than $8 billion since the beginning of the year, according to S3 Partners. Since Tesla's stock was under $200 a share in June, the firm said short sellers have covered $12.6 billion worth of stock. That's a factor that is likely fueling Tesla's current rally: If enough short sellers buy in tandem, it can create higher demand and itself drive the equity price even higher, a phenomenon also known as "a short squeeze."
Two years ago, Tesla CEO Elon Musk promised the "short burn of the century" was coming soon, saying in a tweet that "flamethrowers should arrive just in time." Within an hour of Monday's close, Musk tweeted three flame emojis.
Billionaire investor Baron believes Tesla will hit $1 trillion in revenue in 10 years and continue to grow from there.
Baron's investment firm holds nearly 1.63 million Tesla shares — worth more than $1 billion at current levels.
"It's nowhere near ended at that point and time," Baron said on CNBC. "There's a lot of growth opportunities from that point going forward."
Baron's seemingly wild optimism has become much less outlandish after the stock's rally over the past six months. He is among money managers who have given massive forecasts for Tesla before, including Ark Investment Management founder Catherine Wood. Wood told CNBC last month she believes Tesla could be worth more than $6,000 per share in the next five years – upping her prediction of $4,000 a share she made two years earlier.
But some Wall Street analysts are not so sure Tesla's gains will last, and even political activist Ralph Nader chimed in, saying in one tweet: "Watch out Tesla believers."
"When the stock market bubble implodes, it will have been started by the surge in @Tesla shares beyond speculative zeal," Nader said.
Morgan Stanley analyst Adam Jonas stuck by his underweight rating and $360 price target in a note to investors on Tuesday morning, explaining that his target "is predicated on Tesla achieving 2 million units of sales by 2030 with a 15% EBITDA margin."
But Jonas did highlight that "there were 4 different auto company Super Bowl ads featuring electric vehicles" over the weekend. He noted that about 98% of the vehicles produced in the world have internal combustion engines (ICE) — a fact that may be quickly changing.
"Is it just us or is Tesla's market cap coinciding with bigger forces driving the end of the ICE Age?" Jonas asked.
– CNBC's John Melloy contributed to this report.